Selected balance sheet information and the income statement for Fountainhead Cor

Question

Selected balance sheet information and the income statement for Fountainhead Corporation for the current year are presented below. Selected Balance Sheet Accounts Prior Year Current Year Accounts Receivable $ 19,900 $ 13,500 Merchandise Inventory 27,000 29,700 Prepaid Rent 1,700 0 Accounts Payable 15,200 19,600 Salaries and Wages Payable 3,400 5,100 Income Statement Sales Revenue $ 405,000 Expenses: Cost of Goods Sold 236,000 Depreciation Expense 27,000 Salaries Expense 40,500 Rent Expense 16,200 Insurance Expense 16,200 Interest Expense 14,850 Utilities Expense 13,500 Net Income $ 40,750 Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

Explanation / Answer

Working

Cash Flow (Indirect Method) Net Income 40750 Add: Depreiation 27000 Interest Exp 14850 41850 82600 Change in working capital Add: Decrease in Accounts Receivable 6400 Less Increase in Inventory -2700 Add Decrease in Prepaid Exp 1700 Add Increase in Accounts payable 4400 Add Increase in Salaries & Wages payable 1700 11500 Cash Flow from Operating Activities 94100

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